Havens in a Storm

Small states have learned in recent decades that capital accumulates where taxes are low; as a result, tax havens have increasingly competed for the attention of international investors with tax and regulatory concessions. Economically powerful countries including France, Britain, Japan, and the United States, however, wished to stanch the offshore flow of domestic taxable capital. Since 1998 the Organisation for Economic Co-operation and Development (OECD) has attempted to impose common tax regulations on more than three dozen small states.

In a fascinating book based on fieldwork and interviews in twenty-two countries in the Caribbean, North America, Europe, and islands in the Pacific and Indian Oceans, J. C. Sharman shows how the struggle was decided in favor of the tax havens, which eventually avoided common regulation. No other book on tax havens is based on such extensive fieldwork, and no other author has had access to so many of the key decision makers who played roles in the conflict between onshore and offshore Sharman suggests that microstates succeeded in their struggle with great powers because of their astute deployment of reputation and effective rhetorical self-positioning. In effect, they persuaded a transnational audience that the OECD was being untrue to its own values by engaging in a hypocritical, bullying exercise inimical to free competition.

Cover

Title Page, Copyright

Contents

Acknowledgments

...The idea that became this book germinated after I had taught anarchist political philosophy in Bulgaria. With an instinctively realist outlook, students were incredulous that the tiny self-governing political units that anarchists demanded as the price of direct democracy could ever survive without being conquered or colonized. I began to wonder how very small states survive, why they have multiplied, and how they...

Introduction

...Tax is an area where states are most in need of international cooperation but least able to achieve it. This situation reﬂects the tension between contemporary economic changes and traditional sovereign prerogatives in a particularly stark form. From the early 1990s, policy makers in the world’s richest and most powerful countries worried that changes in the international economy might severely...

1. Death, Taxes, and Tax Havens

...The struggle between rulers and ruled over the collection of taxes,whether for the maintenance of the city-state, the feudal domain, the empire, or the modern state, has been one of the longest and most keenly fought contests in world history. The efforts of subordinate populations to escape taxation have taken on avast array of forms; they stand as an enduring testament to human ingenuity. From...

2. Regulative Norms and Inappropriate Means

...In their efforts to impose or fend off global tax regulation, both the OECD and targeted small states resorted to rhetorical strategies to advance their interests. With the huge power disparities between the two sides, small states listed as tax havens had few other options than a rhetorical strategy. For OECD member states, however, a range of other options was available and potentially more...

3. Hearts and Minds in the Global Arena

...Regulative norms exercised a crucial inﬂuence on the OECD campaign against what it deﬁned as “harmful tax competition” by ruling out a number of options that would have been eminently practical and efﬁcient. Instead, in delegating the campaign to the OECD, its member states opted for a rhetorical strategy,relying on moral and reasoned suasion and speech acts. This course of action...

4. Reputation, Blacklisting, and the Tax Havens

...It has yet to be demonstrated why participants in the tax competition dispute, or in world politics generally, should care about what others think of them.In particular, why should participants be inﬂuenced by normative rules, given that these rules are not taken-for-granted axioms? This chapter and the next aim to elucidate the stakes of the struggle for the tax havens and for the OECD and to explain...

5. The OECD Rhetorically Entrapped

...In international politics, as in everyday life, the reception of a statement depends as much on who is making it as on what is said. “Who says?”is a common question for people assessing the credibility of a claim, piece of information,or argument. This question of the identity of the speaker in evaluating the impact of a speech act has been raised in connection with norms. Risse holds that “It makes...

6. Implications for Policy and Theory

...notable for its politeness and amity. There was so little controversy that the two day meeting ﬁnished half a day early. Journalists expecting a repeat of the insults, tears,and high drama that had characterized previous meetings between the OECD and tax havens left disappointed. At the concluding press conference, the chair of the Committee on Fiscal Affairs and the Samoan Central Bank Governor (formerly a...

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